The Day at a Glance | October 13 2022

*Inflation exceeded estimates in the United States during September (8.2% annual).

*Members of the FED considered that the risk of doing little for inflation is greater than the risk of doing too much, according to meeting minutes.

*ECB starts discussions to reduce its asset balance sheet worth 4.9 trillion dollars.

*Government officials withdraw plan to cut taxes.

*The Bank of England purchased sovereign bonds for a record 2.63 trillion dollars to maintain liquidity in British markets.

*The Bank of Japan reaffirms that it will continue stimulating the economy; the Yen devaluated to its lowest level in 24 years against the dollar.

Economic environment

Inflationary surprise in the United States. Inflationary figures made known in the United States this morning contributed to an increase in volatility in markets after confirming a slower than expected decrease in prices. General inflation logged a 0.4% (vs 0.2%e.) increase and set at an annual 8.2% (vs 8.1%e.), with both figures exceeding estimates and pointed out that inflation is stabilizing, although not decreasing. Monthly growth in September was greater than what was seen in August – even though there was a persistent decrease in energy prices (-2.1% monthly), the rest of the prices increased. The underlying component hiked 0.6% monthly for a second consecutive month and seems to have reached a peak, as expected; at an annual rate, underlying inflation reached a 40-year high (6.6%); Although commodities didn’t log a monthly change in prices during September, services increased (0.8%) and were led by transportation services, which increased at their fastest monthly pace since April (1.9%), medical services recorded an extraordinary 1% hike, and housing prices maintained their monthly 0.7% rate, the highest since 1985. In the rest of the components, food prices have not slowed down in their monthly increase (0.8%), while energy services are still logging increases despite the drops in energy prices (electricity 0.4%, gas services 2.9%). The data reinforces the idea that inflation cannot decrease as the Federal Reserve expects and could require aggressive interest rate increases for a longer period of time, which implies greater risks of a recession and a higher likelihood of seeing financial instability at a global level.